As Yatsenyuk throws in the towel, a grim future for Ukraine

If it weren’t possible to be more pessimistic about the future of Ukraine and its economy, Arseniy Yatsenyuk’s sudden resignation on Sunday is reason to be even more glum. (Facebook)

No one believes more in the possibility of a post-crisis and prosperous Ukraine than Arseniy Yatsenyuk, the country’s prime minister and, too often, its chief punching bag.Ukraine Flag Icon

Never beloved, even among the pro-European Ukrainians who live in the country’s western regions and who resent Russian interference within their borders, Yatsenyuk’s goal since the fall of former president Viktor Yanukovych, an ally of Russian president Vladimir Putin, has been rightsizing an economy that’s underperformed even by standards of the region, with growth rates dwarfed by authoritarian Belarus, a Russian ally that’s retained Soviet institutions.

Facing few good options, Yatsenyuk simply gave up, hoping that, perhaps, the resignation of Ukraine’s last ‘true believer’ might shake loose enough support for the economic reforms that Ukraine desperately needs to continue its financial lifeline from the International Monetary Fund. Ironically, though Yatsenyuk has personally advocated liberalizing reforms and anti-corruption measures for years, his government is now seen as incapable of delivering reforms and as incorrigibly corrupt.

Yatsenyuk must now know how former Indian prime minister Manmohan Singh surely felt after a decade in office (if not quite in power).

It’s not even the first time the pressured premier resigned. His resignation in July 2014 paved the way for fresh parliamentary elections in October 2014 that restored a majority for a pro-western, pro-European government that was ultimately headed by Yatsenyuk.

But his fresh resignation came two months after Ukraine’s president Petro Poroshenko, a former chocolate magnate and businessman with interests across Russia and the post-Soviet world, demanded his resignation in February. Economy minister Aivaras Abromavičius, a well-known reformer, resigned abruptly in February, accusing both the government and officials close to Poroshenko of massive corruption. It didn’t help that last weekend, Poroshenko himself was implicated in the ‘Panama Papers’ leak of individuals with offshore accounts.

With an illustrious career of service, first as foreign minister throughout 2007 under former president Viktor Yushchenko (of ‘Orange Revolution’ fame), then as chairman of the Верховна Рада (Verkhovna Rada), Ukraine’s unicameral parliament until 2008, he was a natural choice to guide Ukraine’s post-Yanukovych government in February 2014. But Yatsenyuk knew from the outset that the chances for economic and policy success were grim.

The country’s economy contracted by around 10% in 2015, followed a nearly 6.5% contraction in 2014, as a paralyzed country suffered through an open-fire attack on protesters in Maidan Square in Kiev, the abrupt resignation and exile of Yanukovych, Russia’s lightning-speed annexation of Crimea and a still-simmering proxy war with Russia over the eastern Ukrainian oblasts of Donetsk and Luhansk.

For now, no one knows what exactly will happen with Ukraine’s new government. Yatsenyuk angrily denounced Poroshenko and the cronies surrounding Ukraine’s new president. For his part, Poroshenko certainly doesn’t want to call fresh elections, because his supporters and the Yatsenyuk-led ‘People’s Front’ (Народний фронт) still control a majority of the seats in Ukraine’s parliament. That outcome wouldn’t be certain in a snap vote.

The 38-year old speaker of the Verhhovna Rada, Volodymyr Groysman, a former mayor of Vinnytsia, Poroshenko’s homeotwn, and a former minister for regional development, was set to become the next prime minister with Poroshenko’s blessing. Yet he has struggled to form a new government, and his efforts appeared to have stalled Monday, a blow to Poroshenko.

American-born Natalie Jaresko, currently finance minister, is understood to have been rebuffed for her offer to lead a reformist government (Facebook).
American-born Natalie Jaresko, currently finance minister, is understood to have been rebuffed for her offer to lead a reformist government (Facebook).

Reformists like Yatsenyuk’s finance minister, the American-born Natalie Jaresko, a Chicago-trained economist, have said they will take no part in a Groysman government. If Groysman fails, Poroshenko may yet turn to Jaresko, who commands the support of the international community and the IMF. In particular, Jaresko might ultimately become Kiev’s best hope as prime minister — playing the Paul Ryan to Groysman’s Kevin McCarthy.

The musical chairs in Kiev comes after a vote last week in The Netherlands, where voters rejected a standard association agreement between the European Union and Ukraine that, in essence, is already being implemented. Though it’s somewhat odd that Dutch nationalists engineered a goofy vote on EU engagement with Ukraine, nearly 61.6% of the electorate voted against the agreement, despite the support of the government headed by center-right, liberal prime minister Mark Rutte. As it was a non-binding vote, nothing will necessarily change EU-Ukrainian relations, but it’s a reminder to EU elites that member-states (and their angry electorates) aren’t excited about unlimited funds to countries within the post-Soviet periphery (and aren’t excited about ever closer union). Functionally, the Dutch vote closed the door on any fast-track Ukrainian membership in NATO.

In the wake of the Dutch vote, Yatsenyuk’s scalp was a perhaps necessary, if not sufficient, sacrifice. A Groysman-led government might only lead to more discord between the corrupt pro-western forces (now personified by Groysman and even Poroshenko himself) and the reformist pro-western forces (personified by Jaresko). Despite its fresh start, a government of Poroshenko loyalists will have an even tougher time convincing a skeptical Europe and IMF to providing the kind of long-term economic lifeline that Ukraine now needs.

Unfortunately for all of them, there are still plenty of hard-right politicians from western Ukraine and pro-Russian politicians in the east.

Poroshenko and his next prime minister will be working against the clock. If forced into snap elections, they might lose power to right-wing, nationalist forces — groups like Правий сектор (Right Sector) — that provided the muscular protection to the Maidan protests, but who have also been eased out of government roles since mid-2014. The hard right’s rise would almost certainly inflame greater tensions with Moscow and might end what is now a tentative ceasefire with eastern, Russian-back rebels.

2 thoughts on “As Yatsenyuk throws in the towel, a grim future for Ukraine”

  1. Ukraine should return to what should be its rightful role as a positive bridge between Russia and the West. Trying to go back and forth between being pro-Western and pro-Russian is a losing game. The country itself is divided, with people in Eastern Ukraine historically counting on trade with Russia to feed their families. The 62% in the Netherlands who voted against the EU agreement with Ukraine should tell the Ukrainians something – if they are willing to listen. Time to patch things up with Russia and try to be friends with every-one, instead of allowing themselves to be pawns in a West vs. Russia competition.

  2. The headline is a bit misleading and the future of Ukraine is not necessarily grim. Reforms have been blocked by oligarchs who will resist change that affects their personal empires, true enough. But Yatsenyuk was part of the problem and he was unpopular because of his failure to produce reforms which in part was his own obstructionism. I think the opinion of him in this article is a bit too complementary.

    I’ve just visited the Vinnitsya and Khmelnitsky regions, including small villages around the towns of Bar and Hritsev where we are trying to work (we try to implement sustainable rural development initiatives funded by the private sector – not short-term, inflexible, donor financed projects). The local political leaders are hamstrung by lack of funds to maintain dirt roads, provide water to homes and maintain general standards of living. But the economic development is patchy and not uniformly bad. Vinnitsya for example is a vibrant city – it helps to be the president’s home town and HQ for his chocolate empire – with Swiss made streetcars, spotless streets and squares and cafes. The intercity train from Kyiv is modern and comfortable. However, there is no question that villages are struggling. Local businesses are not happy with the Kyiv administration and generally are exhausted by corruption – but there was no support from those I visited for the right sector and there was no despair.
    What seems to be happening is that while the IMF and the West, including the media, scream headlines about the corruption that plagues the country, at the local level people are fighting corruption in local courts and from the bottom up.
    This is where corruption will eventually be defeated over time – local communities forcing change on the oligarch structure that has existed even before independence.
    As a western “humanistic” capitalist, I think the demands that Western governments are making that all corruption and political issues be resolved within two year of the revolution is disingenuous. The hectoring from Brussels and particular Germany about reform in Ukraine is a bit irritating considering they have had more than a year to even develop a plan for the migrant issue and have yet to develop a solution. Nor has Europe provided much in concrete aid to Ukraine other than the usual EU donor funded projects resulting in a good deal of paper and little implementation and most alarmingly have put money above democracy by pushing Ukraine to accept the Minsk agreements. Let’s recall that hundreds died in Ukraine and the Maidan defending their right to be part of Europe, not the mafia regime in Moscow. When was the last time any Europeans died to support the EU?
    There is more than the politics in Kyiv that needs to be reported. Ukrainians have traditionally not needed a powerful central government since, unlike Russia, they can rely on their productive land. Despite questionable living conditions, no one is starving (quite the opposite).
    Finally, the Dutch vote was a warning to the EC, not to Ukraine and it was not 62% of the electorate – it was 62% of the 32% who bothered to vote.

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